Approval in remediation case involving bribes gives deferred prosecution guidance: McMillan lawyers

A recent Superior Court of Quebec judgment relating to the approval of a remediation agreement between the Prosecution Service of Canada and a Montreal-based ompany that conducted business in the Philippines using bribes provides valuable guidance on how the program will be used, lawyers from McMillan LLP say.

It is clear from the decision, which builds on a similar agreement involving SNC-Lavalin in 2022, that each remediation agreement will be drafted and approved based on the “specific circumstances” of the offence, the parties involved, and the consequences of the criminal activity notes Ottawa-based McMillan partner Guy Pinsonnault.

Future agreements under this program will involve prosecutors and defence lawyers “devoting a lot of time to fulling all the requirements,” he adds.

Known as Deferred Prosecution Agreements in the United States, the United Kingdom and other jurisdictions, Canada’s relatively new remediation agreement program is a prosecutorial tool for combatting economic crimes. They are legal contracts between prosecutors and offending parties whereby charges are laid, stayed, and subsequently dropped if the terms of the agreement are met.

With this second agreement approved, Pinsonnault says certain key themes are emerging in using these deals and what’s needed to approve them. These include:

• Protecting the open court principle is critical to maintaining public confidence in the agreements;
• The “public interest” requirement is broad and will be considered based on the contextual factors of the case;
• Little room for interveners in the approval process; and
• Court deference applies unless the agreement would hinder the administration of justice or be contrary to the public interest.

Ultra Electronics Forensic Technology Inc. (UEFTI) is a Canadian company with a ballistics recognition system used by law enforcement agencies in Canada and globally. Between 2006 and 2018, UEFTI developed commercial relations with the Philippine National Police (PNP), which led to UEFTI obtaining a procurement contract with the PNP. 

However, it later emerged that the relationship involved the payment of various bribes to government officials and falsifying official records to conceal the bribes. Sales to the PNP during the period amounted to $17 million, and an additional $4.4 million in commissions were paid to local intermediaries to facilitate the purchases.

Following an investigation, the Royal Canadian Mounted Police charged UEFTI with two counts of bribing officials of the Republic of Philippines under s. 3 of the Corruption of Foreign Public Officials Act and one count under s. 380 of the Criminal Code for defrauding the Filipino Government.

While remediation agreements are negotiated and drafted privately, mandatory provisions, including specific monetary and compliance undertakings, must be complied with.

In UEFTI’s case, the four-year agreement included conditions such as:

• a forfeited sum of $3,296,589 paid to Canada;
• a penalty of $6,593,178 paid to Canada; and
• A victim surcharge of $659,318 paid to Quebec.
• Cooperation with any investigation or prosecution related to the offences;
• Reporting to the Prosecution Service of Canada on the implementation of the agreement; and
• Abiding by the terms of an anti-bribery and corruption program under the supervision of an external auditor paid for by the company.

Pinsonnault notes that the public interest criteria, in this case, are “quite different” than in the SNC case, given that UEFTI made voluntary disclosure of the payments.

In the case of SNC, there were potential consequences of a criminal conviction on the table, and its impact on third parties, such as the company’s-company’s employees, if SNC was barred from bidding on government contracts.

The case for remediation in a case of voluntary disclosure is even more compelling, Pinsonnault says, “because authorities would not have known about the issue had it not been disclosed.”

Jamieson Virgin, a McMillan partner based in Vancouver, said another key difference between this case and the SNC matter is that the SNC case involved a domestic crime, and this one involved foreign entities.

“We had a situation here where the courts and the prosecutors couldn’t identify a victim and therefore victim compensation,” he says. “And yet, that was not a bar to the ultimate agreement,” with the court’s analysis outlining clearly why this was in the public’s interest for the agreement to be approved.

Adds Virgin: “And it’s not as if UETFI got off - there was compensation paid, it just wasn’t in the form of direct payments to the victims, as we saw with SNC.”

Virgin says another key takeaway is the court upholding the “open court principle.” Before the hearing on the agreement’s merits, the parties attempted to obtain an order approving the hearing in camera. They requested that the matter remain confidential if there was no approval.

(SNC and the prosecution service made a similar request but in the form of a two-step procedure which allowed all drafting stages to take place in camera and the approval hearing in an open court setting.)

The court denied the motion in this case because, in its view, permitting an in-camera approval hearing would violate the open court principle. It said the UEFTI case did not qualify for an in-camera hearing because the reputational, economic, and procedural factors did not favour granting the order. 

It also cited the need for transparency to “reassure the public that the negotiated agreement is not the result of the undue influence or weight of “big business” and that wealth does not automatically command a favourable result.”

Says Virgin: “Given that these are agreements that are being approved, and there there’s no fact-finding process, it’s vital that companies understand that when they engage in these sorts of agreements, absent clear extenuating circumstances, they will be conducted in an open court and the agreement itself will be available for the public to see.”

Pinsonnault says another important principle that emerged from the UEFTI agreement is the role of victims in the process.

In November 2022, Concept Dynamics Enterprises, a local partner in the Philippines, filed a request to intervene, alleging it had been denied due consideration as a victim in the remediation agreement process. However, the Prosecution Service of Canada said the only parties to a remediation agreement should be the prosecutor and the accused organization.

The court agreed that third parties like victims cannot change the factual basis for the remediation agreement it has to rule. There is no room to assess the weight of contradictory evidence. “If they can be identified, they will be compensated,” he says, adding that such parties can make their point in the civil court system.

This is important, Pinsonnault says, “because companies who make voluntary disclosures of wrongdoing need some certainty that a negotiated remediation agreement presented to the court will resolve the matter.”

Another critical point, Pinsonnault says, is the court’s affirmation that, since the decision to approve a remediation agreement rests on a joint record of the agreed statement of facts, the hearing environment should be non-adversarial. The procedure should not provide consideration to contrary views or conflicting evidence beyond the joint submissions.

The court suggested that, like the process in the SNC case, a remediation agreement should be taken in the same manner as would apply to a joint submission on sentencing in criminal law. Deference is owed unless “the proposed sentence would bring the administration of justice into disrepute or would otherwise be contrary to the public interest.”